As far as I can tell, Loopt wasn't doing very well. http://www.google.com/insights/search/#q=loopt.com&cmpt=... They had an attempt to revive the company to compete with Groupon last year that many here thought was stupid and died an early death (http://news.ycombinator.com/item?id=2696412)
Michael Moritz (Sequoia partner) is still on the board of Green Dot, now a publicly traded company worth north of a billion dollars. Almost the entire board (http://ir.greendot.com/phoenix.zhtml?c=235286&p=irol-gov... ) is Private Equity/VC guys, they do this kind of inside baseball all the time, it's no sweat off their back to do Moritz a favor.
He convinces Green Dot to acquire Loopt for a huge amount of cash (Green Dot was sitting on $225 million in cash). Sequoia makes a cool $15 million.
Related: the always-informative Planet Money did a special on Private Equity and you can see how Bain Capital got its money back on a company that went bankrupt: http://www.npr.org/blogs/money/2012/02/23/147257517/how-mitt... TL;DR the company they bought acquired another company and raised significant debt- they used that debt to pay back Bain Capital.
Product + Hype -> Big Exit is starting to seem like a perfectly legitimate business plan nowadays.
Sam and Chris are both brilliant guys and great BRANDS. Not Steve Jobs great-- but great nonetheless. Guys like this attract A-players and attract PR. Could Sam and his group have $43M in impact for the buyer? Surely.
Listen, success is just a big multiplication formula. If your "leadership brand" number is high enough, you just about can't lose. But that holds true for any other number in the formula (product awesomeness, timing, marketing, business model, etc).
Additionally, Loopt (being founded in 2005) did a ton of work that was obsolesced by the iPhone and ubiquitous GPS. Their timing was off, but you really can't fault them for giving it the college try. At a minimum GreenDot's internal engineering capacity has been massively upgraded.
Google's acquisition of Slide for $100m crushed me. Myself and several others built more successful companies. We had 10x the userbase, larger profits (assuming this based on userbase), and fewer employees (team of 3 here). The difference was I was bootstrapped and working in stealth.
Lesson's learned: avoid bootstrapping. Raise venture capital from well networked investors. Do not work in stealth mode. Do a lot of PR. Be loud!
This ensures that the failure of your company will be an embarrassment for your investors. The louder the better. They will be inclined to have a friend buy you out to save face.
Disclaimer. I'm not saying that should be your primary goal. Goal number one should be passionately building a product you love. A buddy exit is simply a safety net.
Now if we ask ourselves if Loopt was not a Sequoia company, would Green Dot have paid that much money for Loopt's people and technology. They could of easy got a better deal somewhere else.
However I think Sequoia needed to save face on Loopt. They needed to make sure it had an successful exit. The more successful company's in Sequoia portfolio the more investors are willing to invest in them right?
[1]http://www.quora.com/Green-Dot-company/Why-did-Sequoia-inves...
I don't know why PG is trying to hype this up. I see ycombinator becoming more and more like a old boys network.
If your doing a startup don't get discouraged. The reason you should be doing it in the first place is cause you truely believe in the product and the business and not looking to flip your startup for quick cash.
the VCs of silicon valley are very far away from the Wall St type of private equity (although they are becoming closer with the secondary markets now opened up - it used to be that your vc investors were in all the way until the exit)
as for Sequoia, it is pretty well known that the top tier VCs look after their own. Look through the Sequoia history and you won't find very many outright failures, it is a reason why entrepreneurs choose to work with them. I very much doubt Moritz can 'make' Green Dot do the deal, but I am pretty sure he put it all together - it is more a testament to his/their dealmaking abilities than any leverage he would have as a minority shareholder and director in a public company.
Oh, I just want people to stop pretending this is a meritocracy.
The company executives all got bonuses, Bain made a ton of money and the workers got to keep their jobs. The company is still running today.
Still, many think location services can only pay off via connections with payments/coupons/promotions so the tie-up does make sense as more than just a favor between investment buddies.
Less: 17MM Preferred to VCs (Face Value of VC Investment) = 16.6 MM (split among VCs, founders, employees)
VC Participating Share: ~35% * 16.6 = ~5MM
Available for Founders / Employees = 11MM
Total to VCs = 17+5=22MM
I had the opportunity to interview with Loopt sometime ago, right when they in fact did the name change to Loopt.
My read than was that they in long term terms were going to fail as certain constraints to do things were not in their best interests...at that time it was Mobile Operator limits..tie-=ups
Its a sad thing as current deal looks to be only based on patents values..not what Sam's team put into it..
Though Sam himself may not realize it, he has had a big effect on Y Combinator. One of the most important components of YC is the alumni network. It's now quite large (over 800 people) and the founders help one another a lot. We can affect the size of the alumni network very directly, but we have less control over how much they help one another-- without which of course the size doesn't matter.
Sam is, more than any other single person, the one who set the standard for how much the alumni help one another. He set it by example. After each new batch of founders got lots of help from Sam, it seemed natural to them when they in turn became alumni to help new founders that much. We encourage the founders to help one another of course, but Sam's example had more effect than our exhortations. And we lucked out in that respect because Sam is remarkably generous with his time. He's a sort of natural teacher.
He also knows everyone. He has not only done countless introductions for alumni, but did most of the initial intros in Silicon Valley for YC itself. He introduced us to our lawyer, Wilson Sonsini, and he was even the one who introduced us to Sequoia. YC now does many intros per day, but if you follow the tree back to the beginning, Sam was the root node.
If you are one of the few entrepreneurs that has come far along enough to get to a sale - for any amount - I just flat out applaud you.
Ignore that haters - unfortunately Hacker News comments seem to have reverted to the mean (pun intended) as the site has grown.
But it's not.
This sale demonstrates that.
It's a good time to adjust expectations and decide what, exactly, it is in your best interest to believe in.
http://news.ycombinator.com/item?id=3647026
Please note: I say this as someone who has great respect for the look, feel, and polish of Freckle and your other work. My disagreement in that thread was purely about the empirical question of whether lifestyle business are better than moonshots in terms of the "get rich some day" probability.
Have you changed your mind or am I reading incorrectly?
And congratulations, I'm personally excited to see where you go with this.
2 - Was your monthly active user base above 2M?
3 - What contributed to Loopt loosing its appeal over the past 12/18 months?
2. not for our core loopt app.
3. i think in general location services have lost some luster over the last 12/18 months, but i also think a lot of the things that we've been doing--real-time deals, loyalty offers, etc are generating a lot of interest among users and we'll hopefully be able to take that to the next level at green dot.
Congrats on the sale!
How long did the deal take to bring to this point (if that's public)?
This is why pg talks about looking at founders before their ideas.
It's very plausible they walked with between $500k and $1m. That's an awesome return on $20k.
The figures here work out almost exactly to Sequoia and NEA getting their 2x (they invested a combined $17M) and plus the employee pool (2 x $17M = $34M + $9.8M = $43.8 - the announced sale price was $43.4M)
That is just me speculating, but I would be surprised if it isn't far off.
I think it is sad, especially because of all the efforts that we as entrepreneurs put into these Companies. Most of all, I criticize this general sentiment in SV right now, that success=money through acquisition/IPO. If SamA gets his vision realized through Green Dot - all the better for him and for the Loopt team! (and us as users!)
Good luck guys!
To continue succeeding, currently successful but "old world" payment companies like Green Dot need to become technology companies. Given Loopt's stellar team, Green Dot couldn't have chosen a better company to acquire. I have been fortunate to receive advice/help from both Sam and Nick, but read "Shit Sam Altman says" and you'll know how smart these guys are. http://anandkulkarni.posterous.com/-sam-altman-says
It also seems to me that the demographics of Loopt users overlap nicely with the demographics Green Dot wants to target. A head start of 1M+ users in the demographic you are targeting is very valuable.
Congrats Loopt!
That makes more sense now. I was wondering how the talks got started.
I am really looking forward to what Sam has up his sleeves now that he is free.
Everyone seems to forget that before iPhone, and later Android, you had no choice but to partner with carriers - there was no other way to distribute your application.
Even in Europe, where the phone ecosystem is different, access to location required carrier support, and nearly no handsets had the ability to locate themselves without network assistance.
Loopt made mistakes, many of which were mine, but that wasn't one of them.
Which is a perfectly valid option. Just because someone has an idea a good idea doesn't mean that it will make a good business.
The cell phone software market pre-iPhone simply wasn't a good place to be starting a business, no matter what the idea.
I was in the UK 2008-2010 and you could only get Loopt through American carriers. BTW, far back early 2000s, you could get mobile software from getjar.
I just shrugged and closed the tab.
(This is meant as a genuine question, not a snarky comment)
During last summer at YC Sam helped us quite a bit on different fronts. He has this amazing clarity in his thought process and is generally a really helpful guy.
A brief conversation with Sam was what convinced me to apply to YC in the first place, and I'm very glad I did. Sam has shown himself to be an expert, a smooth operator, and an excellent teacher. Green Dot is very lucky to have Sam & co joining them.
